All Forum Posts by: Nicholas Lilly

Purchasing properties at foreclosure sales can be an opportunity for investors. Some of these properties are offered at a fraction of the market value which is one of the reasons investors are incentivized to buy. Before purchasing a property, there are several steps to consider. Here is a basic overview of the foreclosure process.

TOP 5 DUE DILIGENCE STEPS FOR PRE-FORECLOSURE

There are three types of foreclosures: (1) tax sale, (2) trustee sale, and (3) HOA sale. Tax sales are government lines that usually have superior priority over other liens. Trustee sales are mortgage liens. Usually, these mortgage liens have priority over HOA liens. If the HOA lien is junior to the mortgage lien, it will extinguish at the sale. Mortgage liens are generally junior to government liens, therefore, additional diligence is necessary to ensure that those liens are not on title or that you are accounting for additional costs when purchasing the property. HOA liens are junior to government liens and most mortgage liens. Before purchasing from an HOA sale, you should conduct a title search.

1. TITLE SEARCH = When conducting a title search look for liens, release of liens, any break in chain of title, Lis Pendens and abstract judgments. If you are not familiar with the title search procedure, you should seek a professional with experience. There are many title search companies available that can help you.

2. CONTACT TRUSTEE = Reach out to the trustee of the property. Some trustees may provide an inspection report and let you view the interior of the property. Note that trustees are not obligated to provide such reports or allow you on the property.

3. PHYSICAL CHECK = If you have permission you should physically check the property prior to the sale or have a professional inspector. Account for costs associated with capital expenditures such as the condition of the roof, foundation, and HVAC. Also check to see if the property is in a flood zone and whether there are any environmental contaminants. Be sure to check the neighborhood and surrounding areas. *Be aware that you are not allowed onto the property without permission by an authorized representative or agent.*

4. TENANTS OR OCCUPANTS = Tenants or occupants may be residing on the property even after you purchase the property at a foreclosure sale. The proper procedure to remove tenants or occupants from the property is an eviction proceeding. Otherwise, you can make an arrangement to rent the property to them.

5. FINANCIAL ANALYSIS = Make your own financial analysis for equity. This can be done in several ways. One method is to research the fair market value of the property and surrounding properties to compare that value to the estimated cost of repairs, cost of any liens, and cost of any judicial action needed for eviction.

6. BONUS – OTHER DUE DILIGENCE TO CONSIDER = If there is a wrongful foreclosure action related to this property, it may put you in a legal battle. Wrongful foreclosure claims may prevail when the debtor or owner is an active military member, bankruptcy action is pending, or probate is pending. Check bankruptcy twice, during your due diligence and the day of sale because last minute bankruptcies may be filed. 

Every property and transaction is unique, but these tips are the top five that we recommend to you as a guideline for some of the decisions and tasks to be completed before the foreclosure sale.

The lienholder is required to provide 21-day notices of foreclosure sales of a residential homestead. This notice must also be filed with the county clerk and posted at the courthouse. The Statute of limitation is four years for lienholders to start the foreclosure process after default. After the statute of limitation expires, the lienholders cannot collect, with a few exceptions.

All lienholders must send a demand letter to debtors with the intent to foreclose on the property, the demand letter must be sent by certified mail. Debtors have 20 days to cure a homestead property, unless the deed of trust states otherwise. If the debtor is able to cure the default then a reinstatement agreement should be executed unless the terms of the debt have been changed, such as a modification agreement or a replacement note.

If the debtor or tenant has paid more than 40% of the amount due or made 48 or more monthly payments, then pursuant to the equity protection provisions of Tex. Prop. Code Sec. 5.066, the seller or landlord must give a 60-day notice of default and opportunity to cure the default. If debt has not been cured, then the trustee may start the foreclosure process.

All superior liens will extinguish subordinate liens. After the sale, any excess proceeds from the foreclosure sale may be distributed to the subordinate lien holders.

Notice must be given to the IRS and U.S. Attorney (if any) 25 days or more prior to the sale. The IRS has 120 days to redeem the property after the sale. The U.S. Attorney has 60 days.

If you are a property owner or lienholder and need assistance with the foreclosure process, be sure to review the deed of trust, note and all other relevant documents.

Whether you are purchasing your first home or the next real estate deal, closings can be a nerve racking process. There are a lot of factors that come into play in order to successfully close on a property. We have created a checklist for you to ensure your closing goes as smoothly as possible.

We broke down the closing process into three stages: pre-closing, closing and post-closing.

Pre-Closing

1. The Contract

If you are the buyer and your offer was accepted by the seller, you will enter into a contract. Generally, your real estate agent will prepare the contract. If it is a residential property, agents typically use the TREC one to four residential contract. Your agent will also prepare the appropriate addendums. Be sure to thoroughly review the contract to ensure you understand all the terms. If there is something you do not understand, ask your agent for clarification, or, have a real estate attorney review the contract for you.

1. The Inspection

Follow the terms of your contract and calendar your deadline for due diligence. Generally, the contract will outline your time frame for your option period. An option period is a specific timeframe that both parties agree to in which the buyer can terminate the contract for any reason without risking their earnest money. This time frame is crucial because it allows for you to perform your due diligence on the property before fully committing to the contract. You can order a property inspection report which will show you any concerns or issues with the property.

1. Lending

Provide a copy of the contract to your lender so they have the material terms of the agreement. After the inspection is completed, you may discuss negotiation tactics with your real estate agent if there are concerns with the property. Make sure that your lender has copies of all amendments to the agreement if you agree to a different sales price or concessions/reductions are made. Then, contact your lender to ensure an appraisal for the property is ordered and scheduled.

1. Insurance and Title

Shop around for home insurance companies that best suit your needs and select the insurance company that provides the amount of coverage for your home owner’s insurance policy. You may also need to send a copy of this information to your lender. Additionally, you will most likely need title insurance. The title company that was designated in your contract will provide you with a title commitment to start. Be sure to review the commitment, survey and abstract within the timeframe as stated in the contract. If you have questions about title be sure to contact a real estate attorney to review the commitment on your behalf. The attorney may spot issues and recommend an objection letter. To learn more about objection letters, read our article here.

1. Financing

To calculate how much you can afford for a property, the general rule of thumb is 30% of your gross monthly income on home related expenses. Take into consideration the mortgage, taxes, insurance, HOA fees, and cash reserves for home repairs or replacements. Also take into consideration other expenses unrelated to the property to understand your debt to income ratio. Financing should generally be done before purchasing a home, however, sometimes your finances or sale transactions change, then you should reevaluate your budget.

1. Final Walk Through

The day before or day of closing, go to the property. The final walk through gives you the opportunity to inspect the property before the official sale. During this time, inspect any agreed repairs, inspect all appliances, check whether all doors and windows are secured, working properly, or to your satisfaction, belongings of the seller are completely removed, check for signs of mold, check electricity and outlets, and inspect the exterior & backyard.

Closing

1. The Parties

First, know who all the important parties are. At closing, you will likely meet at your title company’s office and a title agent will be present. Prior to your closing make sure to ask your title agent what you need to bring on the day of closing and what needs to be completed prior to closing. For example, most title agents will request that you bring a valid form of identification such as your driver’s license.

1. Funding

You will also be required to bring your down payment at closing. Make sure to confirm

with the title agent if you need to bring certified funds or wire the funds beforehand and how far in advance the funds must be wired. Wire fraud is serious so be sure to double check the wiring information before you send the money. If you are uncertain if the instructions are legitimate, contact your escrow officer.

Consider whether you want your real estate agent or an attorney present with you at closing to review the documents with you. If you are bringing additional parties, be sure to account for additional time for discussions amongst everyone.

1. Important Closing Documents

Prior to your closing, you should set aside time to review all your documents to ensure the information is correct. Double check the names, address, loan amount, other contact information, etc A few important documents include:

1. The closing disclosure,
2. The deed of trust,
3. The note, and
4. The warranty deed.

Post-Closing

1. Access

After closing you should receive all keys, access codes, garage openers, etc. to your new property. If feasible, we recommend that you change all the locks on the property (if this was not previously completed). This ensures that you are the only people with access to the property.

1. Utilities

If you haven’t already set up utilities, then connect your water, gas, electricity, and Wi-Fi. Typically, we suggest that you complete this prior to closing to ensure you have service by the time you close to avoid any periods of no service.

1. Homestead Exemptions

If this is your primary residence, then apply for the homestead property tax exemption and any other exemptions that you qualify for. You can usually find the forms on the county website where the property is located. Confirm that all change of ownership documents with the county appraisal districts are updated to reflect your information.

1. Important Documents

Lastly, make an electronic copy of your closing documents and store the copy you receive from closing in a safe place.

What is a series LLC?

Historically, members had to file, manage, record, and report each LLC separately which meant more paperwork, more cataloging, more expense, and more reporting. That process created more unnecessary work and several issues for not only the members of the LLC but also for the states' regulatory agencies. Some states have resolved this issue by enacting the series LLC. When done properly, a series LLC gives members protection from personal liabilities arising from multiple properties or operations without having the extra expenses of multiple LLCs.

Series LLC also known as master LLC provides liability protection across multiple LLC entities. Business owners and investors ("Members") create LLCs to protect their personal assets from legal liability. Members can add additional protection by forming series LLCs to hold each real property or business entity.

A series LLC is a designated "series" or "child" LLCs from the original LLC aka parent LLC. Each child can hold a specific property or properties, investments, assets, borrow money, or have a specific business purpose. In other words, each series can have its separate rights, powers, duties for specific assets or liabilities and can have a separate business purpose. Liabilities, debts, and obligations are only held against each child LLC and not against the parent LLC or other child(ren) LLCs. Each designated LLC has its own governing documents establishing its members, managers, and membership interests. It can also file lawsuits, be sued separately from the parent LLC, enter into contracts, hold title and secure interest in assets.

According to the Texas Business Commerce Code (TBCC) Section 1.201(b)(27), Legislators defined Texas series LLC as a legal "person." Under the Texas Uniform Commerce Code (TUCC) Section 9.102(3) a debtor is a person obligated on an account, chattel paper, or general intangible. This new law allows series LLCs to acquire assets through debt.

Series LLC are commonly used for business ventures, multiple investments or rental properties, or businesses that operate multiple channels of revenues. One of the benefits of a series setup is that Members can avoid filing separate tax returns for each series.

How does someone form a Texas series LLC?

According to Texas Business Organizations Code (TBOC) Section 101.602(a)(1)-(2), specific languages must be included in the certificate of formation, operating agreement, and maintain separate books and records for each series. In order to receive series LLC benefits, the series must be filed with the Texas Secretary of State, have a unique name from its siblings and parent LLC, conduct business, and be in compliance with the Texas Business Commerce Code and Texas Business Organizations Code.

There are three types of series LLC: (i) registered LLC, (ii) protected LLC, and (iii) series LLC that doesn't fall into registered or protected LLC class.

The minimum requirements to get the benefits of a series LLC is under TBOC Section 101.602(a)(1)-(2) which states that the series LLC must be included in the certificate of formation and company agreement, and the company must maintain separate records for the assets of each series. See TBOC section 101.601 through 101.621. Generally, under the certificate of formation, under the supplemental text section of the form, you add the series information.

Protected series requires that the LLC certificate of formation must provide notice of the series structure and the LLC agreement must permit the formation of different series. The series LLC must be properly recorded and maintain accounts for separate assets and liabilities for each series. Essentially, to file for a protected series, you must file an assumed name certificate in compliance with Chapter 71 of TBOC.

Registered series requirements are the same as protected service with additional documentation that a certificate of registered series is filed with the Texas Secretary of State by the parent LLC. When done properly, this is particularly beneficial when a third party vendor or purchaser of the company requires a certificate of status which shows the registered series in use and in good standing with the State. Additionally, registered series can file other documents with the Texas Secretary of State in relation to that series and provide certified copies to third party vendors or purchasers.

To form a name for a registered series, it must state the name of the parent company, followed by R.S or RS, then name of the series. For instance, if the parent is Texas Real Estate Group LLC, the following are acceptable:

1. Texas Real Estate Group LLC - RS Harvest Blue Houston or 2. Harvest Blue Houston, a registered series of Texas Real Estate Group LLC

Texas is one of the few states that offer series LLC. Not all states will recognize Texas series LLC, however, Texas is unique in that it will allow you to register out of state series LLCs also known as foreign series LLC.

The laws of a series LLC are ever changing and ever growing. It is a relatively new law and solution provided by some states. Although this article provides some basic information on the series LLC, we always recommend that you do additional research through credible sources and keep up with the law. We will always make good faith efforts to continue to update our articles and resources.

A non-disclosure agreement (NDA) is an agreement document that creates a confidential relationship between parties who will be exchanging confidential information. They are sometimes called secrecy agreements or proprietary information agreements.

It protects sensitive information such as company financial information, trade secrets, and other company information. Typically, the NDA will be integrated into other principal agreements relating to the subject matter of the NDA such as proposals, contracts, representations and agreements.

It is always a good idea to separate trade secrets from confidential information in the NDA, this is because trade secrets usually have a longer protection period by law. In addition, after NDAs expire, intellectual property rights such as copyright or patents may remain to protect trade secrets.

The NDA must be supported by a fair consideration such as payment for service or potential employment.

What is Confidential Information?

This is the information that the NDA seeks to protect. Information sought to be protected by an NDA must be specific so that there is no ambiguity, and for the courts to consider the agreement reasonable.

Examples of information protected by NDAs include trade secrets, financial information, customer information, intellectual property, product formulae, product information, business plans, contracts with other organizations and computer codes or access processes.

Sometimes, defining confidential information is hard because a whole lot of information is involved, especially in unilateral NDAs. In such situations, a company can provide for exclusions of confidentiality.

This exclusion of confidentiality states that all information shared is confidential except for certain information which will be expressly listed. This allows the company to catch the exceptions they would normally have missed if they had defined confidential information only.

NDAs should always be in writing so that the information protected is easy to identify and for the written agreement to serve as evidence in case of enforcement action or potential breach. For example, in Texas, the Texas Uniform Trade Secrets Act (TUTSA), which was adopted in 2013 specifies that an NDA must be written and signed by the parties. The law also goes on to state that the document must define the information protected and specify the uses of that protected information. The information should still qualify as a trade secret.

The information disclosed must still be valuable, secret and owned by or in control of the disclosing party. Also, an NDA should not seek to prevent a disclosure demanded by law, for example, an NDA to prevent a person from reporting a crime which the person is legally obligated to report will not be enforceable.

The scope, duration and restrictions in the NDA must be reasonable. For instance, an NDA seeking to restrict an employee forever from applying all skills he acquired in a workplace after leaving that employment may not be considered reasonable.

Types of NDA

NDAs may be unilateral or bilateral/mutual or multilateral.

In unilateral NDAS, only one party receives information from the other party and the former bears the obligation to safeguard such information. Examples of unilateral NDAs include those for employing new staff or enlisting a project expert.

In a mutual or bilateral NDA, information is exchanged between both parties and both parties are to keep the information exchanged secret. This is common during negotiations for proposed business collaborations for projects, mergers, acquisitions and selling of a business.

In multilateral NDAs, there are more than two parties exchanging information to do business together. An example is a group of companies trying to come together for a joint venture.

Parties to non-disclosure agreements

The parties to the NDA must be parties who have a legitimate interest to protect in the subject of the NDA; these parties with interest are also the only ones that can be bound by the NDA.

Depending on the type of NDA, the classification of parties differs.

1. The disclosing party: this is the party that already has access to the sensitive information that is to be protected by the NDA. This could be an employer who wants to take in an employee or a company that wants to give an independent contractor access to some of their resources such as data to execute certain tasks.
2. The receiving party: this is the party obtaining information from the disclosing party and he bears the greater burden of maintaining the confidentiality of the information given by the disclosing party.

Both parties are usually charged with maintaining the confidentiality of the information, limiting third-party access to the information and limitation of the use of the information to the purpose stated in the agreement.

In mutual and multilateral NDAs, the disclosure of information and the obligation to maintain confidentiality goes both ways. This usually entails the exchange of information between parties involved, so no party is solely the receiver or discloser.

Pros and cons of non-disclosure agreements

NDAs help put parties at ease to negotiate freely with access to full information without worrying about information leaking. Since sensitive information is necessary to the negotiations but disclosing parties may suffer harm if this information leaks, an NDA works to put parties at ease and spell out the consequences of a breach.

An NDA could also impact future contractual obligations or business opportunities. For example, where an NDA covers financial information but one party later seeks funding from investors, the party may need to disclose this financial information. But since an NDA exists on it, the business opportunity may be lost. It may also seem like it makes a business relationship start with mistrust. Some talented potential employees may even avoid working with a company because they may not be able to talk about their work under the NDAs which could make them unable to demonstrate their capacity to future employers.

Remedies for breach of a non-disclosure agreement

NDAs are contracts too. When they are breached, many remedies that apply in regular contracts can apply. Typically, these remedies usually include injunctive relief, damages, and termination of the agreement for which the NDA was made.

For instance, the disclosing company may demand damages, the damages will be quantified based on the loss that the leaking of the trade secret has caused. Injunctive relief may also be gotten by a disclosing party against an erring party to stop further disclosure or use of the confidential or proprietary information. Punitive damages may also be awarded where the disclosing party shows intentional harmful conduct by the receiving party, such as a plan to fraudulently obtain information from the very beginning.

Duration of an NDA

Some NDAs state the period for which the confidentiality agreement will be in force while some do not. Some validity periods range between one to ten years, depending on the reason for which the NDA is made.

Those who do not state a period usually relate to technological research and development. This is because the information in the agreement will later legally become public knowledge and that means that the non-disclosure obligation is no longer in force.

On the other hand, an NDA about a project subcontracted to a contractor may have an indefinite validity timeline if the company does not wish to disclose that it collaborated with a contractor on the project.

In Texas, an action claiming relief for breach of an NDA or misappropriation of trade secrets must be brought within three years from the date of the alleged misappropriation or breach.

When information should be returned or destroyed under an NDA

NDAs are usually made to support the disclosure of information for another contract. For example, an NDA may be made between two companies before negotiations for a merger begins, an employee may also be bound by an NDA on his contract of employment. If the principal agreement is canceled or the parties did not proceed with it, the receiving party has to return the information protected under the NDA. For information that is contained only in documents, the disclosing party may request that the receiving party destroy the information. It is usually better to have a clause for the destruction or return of information in the NDA so that if negotiations fail, the sensitive information still stays protected.

Conclusion

The law covering NDAs is complex, so it is always good to review it with a lawyer before signing. The peculiarities of each case determine its enforceability.

Every business faces a critical decision-making period when deciding whether to accept or go ahead with a business deal. This is where expert due diligence comes in, so as to avoid gambling away your business.

Expert due diligence is crucial when it comes to business transactions. It is a critical and fundamental business skill that can help you identify potential risks, liabilities, issues with regulatory compliance, and opportunities associated with your transactions. It involves thorough evaluation and research of a business in great detail, understanding the client’s commercial objectives, analyzing industry documents, and identifying key business issues before a deal is made.

One of the first steps and key considerations in due diligence is to gather information about your client and their counterpart. This includes information about their business, financials, and any legal issues they may have encountered in the past. It's important to understand their reputation in the industry and the market, as well as any potential risks or red flags.

Knowing your client's objective is also crucial. This means understanding what they hope to achieve through the transaction, whether it's growth, expansion, or a strategic partnership. This information will help guide the negotiation process and ensure that both parties are on the same page. The type of business engagement and the level of interest in the counterparty or its assets influence the goals of a due diligence inquiry.

For instance, a cordial agreement between a potential buyer and an experienced seller could provide the groundwork for a long-term alliance, whereas a hostile asset sale during bankruptcy would call for a different strategy. Whether the client is acting as a buyer, seller, or bank in a loan transaction will affect the due diligence procedure. In order to accomplish the goals of the inquiry, information gathering on the counterparty is essential.

Understanding the process of the transaction is another key consideration. The procedure, timetable, and any legal or regulatory requirements should all be understood when performing due diligence for a purchase. This entails deciding who gets access to information and when, as well as setting investigational goals. The seller can submit papers to a virtual data room, and the buyer often develops a list of questions for the target company. It can also be essential for the buyer, seller, and each of their legal representatives to have a conference call. In order to prepare for disclosure deadlines and detect potential deal roadblocks, the seller may carry out "reverse diligence" on the buyer.

Finally, it's crucial to comprehend the motivation behind the trade. This entails being aware of the advantages it will offer to both parties as well as how it fits into their respective long-term company strategies. The negotiation process will be aided by this information, which will also guarantee that both parties will gain from the deal. Risks such as regulatory, legal, financial, tax, and integration must be assessed and managed to proceed with a planned deal. Research is conducted to assess the target and its assets, support negotiations over warranties and representations, and corroborate assumptions.

How to Handle Conflict

A business transaction may end in conflict, despite the best efforts of all parties involved. It's critical to understand the special legal issues that could come up in these circumstances, which is another key consideration for due diligence. For instance, while applying Texas-based legislation, the state's strong preference for ADR processes like mediation and arbitration is an important factor to take into account. Texas law actively encourages parties to settle disagreements without resorting to the legal system, and numerous contracts and agreements have clauses requiring ADR in the event of a disagreement. It is crucial to be aware of these rules and have a strategy in place for using ADR to settle disputes if necessary. The possibility of injunctive remedies in Texas courts should also be taken into account. Where there is a potential for irreparable harm, such as when a non-compete agreement has been broken or trade secrets have been misappropriated, Texas courts are typically ready to issue injunctive relief. It's critical to be informed about these options and to have a strategy in place for requesting injunctive relief if required.

When engaging in any business transaction, it is essential to conduct thorough due diligence and be aware of any unique legal considerations that may apply. By being knowledgeable of the law, carrying out careful due diligence, and resolving conflicts tactfully, businesses can successfully close deals and protect their legal interests.

Are you planning to evict your tenant?

An eviction lawsuit is filed by the landlord to remove tenants and their personal properties from the rented property. In Texas, evicting a tenant is governed by Texas Property Code section 24 that a landlord must follow. If the landlord has valid grounds to evict a tenant, the landlord should send a 3 day notice to vacate. If the tenant still has possession of the property, an eviction lawsuit must be filed by the landlord. A similar proceeding should be followed even if there is no written lease agreement to begin with. This is called Tenancy at Will. Otherwise, he/she can be sued for a forceful eviction and be held liable for civil penalties, damages, court fees and other legal fees.

Tenant Protection Act of 2019

Landlords are not allowed to terminate a residential lease without “just cause”. Notice is required along with the description of “just cause”. Here are common legal grounds for evicting a tenant:

Failure to Pay Rent on time

Failure to pay rent is one of the most common reasons to evict tenants. If tenant fails to pay rent as agreed upon the lease agreement, the landlord has valid grounds to evict a tenant. In such cases, the landlord is required to provide 3-day written notice to the tenant either to pay rent or vacate the property. However, a landlord may allow late payment of rent through late fees. Under Texas Property Code section 92.019, a landlord mat not collect late fees for failing to pay any portion of the rent unless the landlord provides notice of the fee included in the written lease, the fee is reasonable, and any portion unpaid has been longer than 2 days after the rent was due.

Late fee is considered reasonable if it is not more than 12% of the rent for the rental period under the lease for a dwelling located in a structure that contains not more than four dwelling units or 10% of the amount of rent for the rental period under the lease for a dwelling located in a structure that contains more than four dwelling units or the late fee is more than the applicable amount but not more than uncertain damages to the landlord related to the late payment of rent, including direct or indirect expenses, direct or indirect costs, or overhead associated with the collection of late payment.

A late fee may include an initial fee and a daily fee for each day any portion of the tenant's rent continues to remain unpaid, and the combined fees are considered a single late fee. A landlord who violates this section is liable to the tenant for an amount equal to the sum of $100, three times the amount of the late fee collected in violation of this section, and the tenant's reasonable attorney's fees. A provision of a lease that purports to waive a right or exempt a party from a liability or duty under this section is void. This section relates only to a fee, charge, or other sum of money required to be paid under the lease if rent is not paid and does not affect the landlord's right to terminate the lease or take other action permitted by the lease or other law. Payment of the fee, charge, or other sum of money by a tenant does not waive the right or remedies provided by this section.

Breach of lease agreement

It is a common principle that a contract must be followed in good faith by the parties. Once a tenant violates or breaches the lease agreement, he/she may be subjected to penalties specified in their contract. Other common lease violations are damaging the real property, staying longer than agreed upon, keeping pets without the consent of the owner, or breaching one of the material terms of the lease agreement.

Performing illegal activity

Involvement in an illegal activity may be valid ground to evict a tenant. If the tenant has been conducting illegal activities in the property, the landlord can evict the tenant by providing a 3-day notice to vacate the property. Common illegal activities are involvement in drugs, subleasing the property without prior approval, illegal gaming or gambling, cockfights.

Holding over

A holdover tenant is someone who continues to stay in the rented property without the consent of the landlord even if the lease has already expired or has been terminated. A 30-day notice to vacate must be given by the landlord to a holdover tenant.

Health and safety violations

If the tenant endangers the health and safety of another tenant or the property itself, the landlord can evict the tenant.

Unauthorized occupation

If the tenant has guests who overstay longer than lease agreement allows, the landlord can evict the tenant along with the guest(s).

Knowing these legal grounds to evict a tenant in Texas is only one part of the picture. The eviction process can be a complex matter to deal with. It is advised to consult with an attorney.

Breaking or terminating a lease agreement early can be a headache to the landlord. Regardless of the reasons, generally, the lease holds the tenant liable for the remaining rent until the lease agreement expires. This is called the blanket rule. In some cases, Texas Tenant/Landlord Law may legally allow tenants, or even the landlord, to break a lease early without penalties.

The following are the instances when tenant may be able to legally move out from the property without any liability or landlord may legally remove tenant from the property:

The lease agreement specifies early termination clause

Since a lease is a contract, both parties may negotiate on the terms and conditions that allow a tenant to terminate their lease early. However, landlords may subject the tenant to a minimal penalty which usually amounts to two-month rent.

Both parties mutually agree to break lease agreement early.

Either the landlord or tenant may ask the other party to break the lease early. And when such a request is accepted, the tenant may be able to move out without paying penalties. It is important that said agreement is entered voluntarily and freely by both parties. To protect their both interests, it must be reduced into writing and affixed by parties’ signatures.

Tenant suffers damage due to flood for failure by landlord to inform him that the property is in 100-year floodplain

A 100-year floodplain refers to any area of the land designated as a flood hazard with 1% or greater chance of flooding each year by the Federal Emergency Management Agency. Landlords are required to disclose that the property is located in flood prone area and/or the property is known to have been damaged at least once during the 5-year period before the lease. Landlords are not required to disclose it if the property is elevated. If the landlord fails to inform the tenant and the latter suffers substantial loss or damage to his/her personal property as a result of flooding, the tenant may terminate the lease by giving a 30-day notice to the landlord.

The tenant is a survivor of family violence.

This ground is allowed to be raised when one member of the household commits physical harm or reasonably places another in fear of imminent physical harm. In this case, the victim of family violence has the right to break the lease and leave early after providing the landlord proof of circumstances. Tenants’ have the right to file a policy report, seek emergency assistance because of family violence. Landlords cannot evict tenants or threaten to evict victim tenants for domestic violence, abuse, or sexual assault. Tenants who are victims of such offenses may terminate the lease without obligations for future rent or termination fees. This tenant must provide a protective order or temporary injunction signed by the judge against the aggressor (co-tenant) of the property in order to terminate the lease without future liability of rent payments. Lease agreement should contain your right as a tenant to early termination for domestic violence. Tenants are responsible for rent before the lease terminates. If a landlord does not let tenant terminate the lease under these conditions, she/he may be liable to tenant for one month’s rent, plus $500 and attorney’s fees

The tenant or parent thereof is a victim of sexual abuse or stalking

A survivor or the parent or guardian of the victim of a sexual abuse of a minor or stalking which happened within the past 6 months on the premises or at any dwelling on the premises can legally end a lease early. He/she just needs to provide the landlord with documentation of the abuse from licensed health care services and licensed mental health services who examined or evaluated the victim and/or law enforcement incident report, or protective order signed by the judge.

The tenant dies.

When the tenant who lives alone in the rented property dies, the representative of his/her estate can terminate the lease agreement early. The representative must provide a 30-day notice to the landlord. Keep in mind that a tenant's death does not absolve him/her or the estate of the delinquent, unpaid rent and damages to the leased property not caused by normal conditions.

The tenant is deployed or permanently reassigned for military service.

When a tenant is deployed or permanently reassigned for military service, he/she has the right to end the lease. Under Servicemembers Civil Relief Act (SCRA), the following are considered “uniformed members:”

• Armed services
• Activated National Guard
• Commissioned Corps of the Public Health Service
• Commissioned Corps of the National Oceanic and Atmospheric Administration

To terminate the lease agreement, the tenant must meet the following conditions:

• Tenant joins the military after signing the lease agreement or signed the lease agreement while in the military then ordered to permanently change location or deploy for more than 90 days;
• Tenant provides landlord written notice; and
• Tenant provides landlord copy of the military ordering him/her for a permanent change of station or deployment for a period of 90 days or more.

Landlord fails to perform its duties

1. Failure to do repairs

Texas law mandates residential landlords to make a diligent effort in repairing property problems that materially affect the physical health or safety of an ordinary tenant. Common problems are sewage backups, mold, infestations of rats, and other pests, faulty wiring, roof leaks and it violates the city’s building, health and fire code poses health and safety risk.

In this case, the tenant must notify the landlord of the problem and give the landlord reasonable time to fix it. It is important that the problem must not be caused by the tenant or one of their friends, family or guests and the tenant must have diligently paid the rent. The general rule is that if a tenant has breached the contract or is in default of payment, the landlord is not obligated to remedy.

If an incident occurred not caused by the tenant and the property is as practical matter totally unusable for residential purposes, the tenant may terminate the lease by giving notice to the landlord before repairs are completed.

1. Failure to install, inspect or repair smoke alarm

Texas law requires the landlord to install, inspect and repair smoke alarms prior to or at the beginning of the tenant’s lease. If no smoke alarm has been installed, the tenant can notify the landlord with a written notice to do so. Failure to act on the said request and if the landlord will not provide funds for such repayment, one of the remedies provided to the tenant is to legally end the lease early.

1. Failure to disclose management information

A tenant has a right to know who owns and manages the property. When such information is not available, he/she can request in writing of the said information.

Other grounds

• Landlord violates tenant’s privacy rights;
• Landlord wrongfully cuts off water, wastewater, gas or electric service; and
• Landlord wrongfully changes the locks or prevents tenant from being in the rental property.

In all of these cases, it is important to read your lease agreement and negotiate any terms and conditions accordingly. Breaking the lease without the legal justification may subject the tenant to payment of the remaining rental fees, damages and cleaning fee and other costs indicated in the lease agreement. Nonetheless, breaking a lease agreement before its expiry is an issue that needs to be handled properly so as to avoid any liability and inconvenience.

How do you know you’re the owner of real property? Your proof is a warranty deed.

A warranty deed is a written legal document that transfers legal and equitable title of real property from one person or entity to another. Three common deeds in Texas are General Warranty, Special Warranty, and Quitclaim.

In real estate, a warranty is the promise of the seller to the buyer that he/she really owns the property. This is called “Warranty of Title.” In the same vein, the buyer expects that the seller promises no other liens or claims to use the property being sold to him. This is called “Warranty Against Liens and other Encumbrances.”

General Warranty Deed

In this type of deed, a buyer is given more protection from defects and issues. The seller guarantees the buyer that he/she has the full title to the property and the buyer is assured that their title is free and clear from encumbrances. This means that the seller will defend and protect buyer against right claims of third parties to the property (warranty of title) and no liens or encumbrances in the property (warranty against liens and other encumbrances) exists except on the items listed in the deed.

A general warranty deed generally contains the clause that follows:

“Grantor does hereby bind Grantor, Grantor’s heirs, executors, and administrators to WARRANT AND FOREVER DEFEND all and singular the Property, subject to the matters set forth in this General Warranty Deed, unto the said Grantee, his heirs, and assigns, against every person whomsoever, lawfully claiming or to claim the same, or any part thereof.”

Special Warranty Deed

On the other hand, a special warranty deed provides buyer limited warranties to the defects arising only during the seller’s period of ownership. In this type of deed, the seller does not guarantee that their title is free and clear of any defects before the seller acquired the title or ownership of the property.

A special warranty deed generally contains this similar clause:

“Grantor does hereby bind Grantor and Grantor’s heirs and legal representatives to WARRANT AND FOREVER DEFEND all and singular the Property, subject to the matters set forth in this Special Warranty Deed, unto Grantee and Grantee’s heirs, legal representatives, and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof, by, through or under Grantor, but not otherwise.”

Quit Claim Deed

Quite contrary to general warranty deed and special warranty deed, a quit claim deed does not establish title of the seller in the property. When a buyer receives a property under a quit claim deed, such transaction did not transfer any title of the property to the buyer. However, it can be noted that the deed only transfers whatever present interest a seller has to the property. Simply stated, this type of deed does not provide protection to the buyer because there are no warranties.

Most common uses of quit claim deed are the following:

• Gift from a family member to another. This entails a trust between the parties.
• Divorce decree. This happens when one spouse divests the other party’s interest in the property.
• Adverse possession. An adverse possessor takes the property as their own.

When engaging in a real estate transaction in Texas, it’s essential to carefully consider the type of deed being used and the level of protection it provides.